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The Nafta Negotiations Show That Mexico Is Violating The Agreement In The Auto Industry. Autos Are A Big Trade Problem, And China Is An Important Contributor To The Problem

ArmchairPolitiicianNafta, November 10, 2017, by Brad Peery,
Blog Site: WWW. ArmchairPolitician.US,
Email:ArmchairPolitician.US@gmail.com

The auto industry is a big reason for the $63 billion trade deficit that the U.S. has with Mexico. In the auto industry, manufacturers have integrated supply chains of parts used in manufacturing them. Cars made in the three countries can cross the borders duty free if 62.5% of the content is made in a Nafta country. The U.S. wants to raise that percentage to 85%, with a minimum of 50% of the content being made in the U.S. The U.S. is trying to get the auto manufacturers to return their plants from Mexico to the U.S. An alternative way to address that issue is to require that 50% of the content of an auto be produced in the U.S.

An important issue that the U.S. is pressing is verification that 62.5% of the content of a car manufactured in Mexico comes from one of the three Nafta signatories. The U.S. allegation is the auto supply chain in northern Mexico uses components, particularly from China, that are not identified as foreign components. The U.S. is moving to have the suppliers document rigorously that their components are made by the Nafta countries. In addition, the auto manufacturers in Mexico must, for several dozen components used in engines and transmissions, use only Nafta manufactured parts.

There is a tracing list used to identify the origin of automobile parts. The U.S. would like to see it expanded. Of particular interest are steel, leather and fabric used in the manufacturing of seat cushions. Components that are alleged to come from China include steel and other metals, hardware and electronic components.

The downside case is that companies will start manufacturing in China where the import duty is only 2.5%. The U.S. duty of 2.5% compares to the 25% tariff that China imposes on foreign manufactured cars that are sold in China.

ArmchairPolitician.US
The U.S. Trade deficits with Mexico and China are being exposed as to some of the unfair trade practices that China uses against the U.S., and the inequity of the current Nafta trade pact that outlines some of the ways the U.S. is disadvantaged by the pact, and in particular, the manufacturing of autos in Mexico that are imported into the U.S.

The most blatant disparity that the U.S. faces with China is the 25% import duty China charges for foreign imports compared to the 2.5% tariff that the U.S. charges. The benefit of Nafta to Mexico and Canada is that they can avoid such possible import tariffs by fairly meeting the Nafta domestic manufacturing requirements.

President Trump is to be praised for his willingness to challenge the Nafta and Transpacific Partnership (TPP) benefits to the U.S., particularly with respect to their U.S. job development issues.

See
ArmchairPolitiicianNafta, October 24, 2017, by Brad Peery, WWW. ArmchairPolitician.US, ArmchairPolitician.US@gmail.com
The Question Is Being Discussed As To Whether Nafta Benefits The U.S. And What Is The Downside Of Its Demise.

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